good morning. stocks soaring to record levels. today tests the start of bank earnings. results due from wells fargo before the bell. plus, a rough week for boeing. today, u.s. transportation officials are set to announce a special review related to some of the recent electrical problems on the new 787 dreamliner. it's tri, january 11th, 2013, and "squawk box" begins right now. the index is now 93 points

off its record low that was locked back in october 2007. we've been watching the futures this morning, and right now those u.s. equity futures are indicated slightly lower for the dow futures just over six points, but the s&p futures and the nasdaq futures are indicated slightly higher. this is a global story with world stocks near eight-month highs. european stocks consolidating in early trading today. france pulling back slightly, but in germany, the dax is up by just over 8.5 points. the ftse is up by about five points or so in london. if you want to know who is taking part in this rally, check out these new statistics. investors poured $5 million stocks into mutual funds. that is the largest weekly inflow since 2001. mean too many, etfs gained about $8 million in cash. it combines to 8el.3 million into flowing stocks funds overall. and it means investors overall

are coming back into the market. >> is that a big number? >> at the beginning of the year, you tend to get a lot more because that's when things start picking up again if you're automatically depositing money in your 401(k). >> i need apples and is apples. i need year over year. >> it makes it a really big number, too. >> does it? >> i'll do some research. but we do see a lot bigger numbers coming in at the beginning of the year. >> 18 million is a lot to me, a lot to you. >> but when you look at the federal debt, maybe not a lot? >> i don't know. i don't know. and you know what? i don't know -- i don't know how big -- >> but at the beginning of the year, you always see a big -- >> and because everything is always contrainan in the stock market and because people rush in at top, i don't necessarily want it to be really big because if it's really big, people are getting ready to -- so i don't know whether it is big.

>> you would also think that people would look at this as the prospects for lows on the interest rates. they would say the bond market isn't where i want to be so i'm going to go out on the risk spectrum a little bit. >> i'm still looking in terms of the earlier numbers. let's get to the top corporate story of the morning. it is boeing. phil lebeau is+++j™n dreamliner. the review is likely to include a study of the design and electrical portions of the plane. we will bring you all that news at 9:00. it's 9:30. there it is. phil will join us from d.c. with more in the next half hour. we'll take a look at boeing shares. you can see it's been a rocky road this week, but the shares have climbed back after that dip middle of the week there. and the dreamliner was hit by

two more mishaps in japan today. one suffered a cracked cockpit window and an oil leak. both flights were operated on nippon airways. >> i'm wondering about the maintenance on nippon. >> do you think it's that? >> i don't know what it is. it seems to me that -- i'll defer to the experts and people like phil. but just my inclination is to think -- they mentioned the windshield. there's five panes. it was the very outer one and it points out in the article -- and it article probably didn't want to point it out, they see it on all different aircraft makes over there, you get cracks and then -- >> we're being joined later this morning. he said that he thinks at this point, at least, it looks like it's very weak, the idea that they're all linked together. >> and you said yesterday if you have an oil leak, we're going to hear about it with boeing after the week we've had.

i don't know what that means. now, you know, they're going to check specifically the power system and there's in innovative things on this plane. that's what i'm saying, we need analysts to say -- >> most people are anxious. there's an interesting story about -- >> what else? >> it's a lithium ion battery. historically, you couldn't use those. by the way, you have this problem in cars. the volt ves this issue. batteries unto themselves are very flammable and that's the big issue. they can overheat and -- >> right. you would want to make sure before you based an airline power system on that that -- >> and boeing will tell you that they have all sorts of backup systems, that they have all sorts of breaker systems so that the battery can't overheat. >> now you're conduct ago special interview today? >> i'm not. i'm conducting the the flu today. >> you have chills? >> i am one of those members of our audience, perhaps.

i hope they have -- >> is it just a head cold, the flu this year? >> i don't know. >> mine is coming back a little. >> i was so cold this morning that i had to keep the car -- >> are your high beams on? are you charging? >> no, no, no. but -- >> does it feel weird? >> oh, no. can i say two things? first of all, i'm sorry you're sick. i really am. and i'm sorry on, i was watching nightly news last night and they had a doctor on who said do not go to work while you have a fever. wait until you have 24 hours. >> i'm a bad roll model. >> they also said you could pick up up from people -- >> but i feel really bad. i don't want your boys to get it and i don't want your wife to get it. so maybe you should go. >> go home. >> maybe we should rent a room for you. >> becky found out that her desk, a person's desk has 400

times the germs of a toilet. >> the average desk they said is 400 times dirtier than the average toilet. i said i'm eating lunch tt today in the bathroom. >> were surrounded by all sorts of flora and fauna. in fact, there's something that you actually need. >> i'm guessing neither one of you has germs i need. >> whatever this is -- >> but germs is a nasty word for all of this life that we're surrounded by. >> like i said, i'll take my chans with the toilet bowl rather than the desk after hearing 400 times. >> it's when your immune system is down that you're susceptible. >> it's not necessarily me. it's those at home that you don't want to get it the. >> it's the circle of life. >> yes, i know. but i don't want to eat 4 had 00 types of germs. >> when you're talking about bacteria and things like that, it's all logirithmic.

>> maybe it's only 387 times as dirty as my desk. >> the worst thing is your mouth is probably dirtier than the feet of your dog and they're out there running around. >> good morning, everybody. hope you're not eating breakfast right now. >> do you test anything for fecal matter? >> i don't want to hear this. stop telling me. >> it's everywhere. >> andrew, i really hope you fool feel better. >> all this because you're wearing a jacket. >> i'm trying to stay warm. >> as you said, you have two young children, right? >> i'm just going to hold it together for the next three hours. that's my hope. don't hold it. we won't make the tv news reel if you do. do something crazy. anyway, american express announcing it's going to cut 5,400 jobs. the credit card company taking steps to restructure its business and pay legal bills. the ceo analyst said yesterday

spending continues to grow and the job cuts are not related to the company's macro point of view. chevron is expecting the fourth quarter to be notably higher. chevron is preparing to bring its refinery enrichment in california back to full production this quarter. the crude unit of the 245,000 barrel per day plant was badly damaged in august. >> do you know what the answer on american express, why they are cutting if it's not related to their broader view of the economy? >> no. >> there is no great explanation, except they want to be more and more efficient. >> yeah. and wells fargo is the name to watch in earnings today. the company is going to post quarterly results before the bell. the analysts are looking for 89 cents a share with a lev knew

number of 24dz billion. in gaming news, retail sales fell last month. call of duty black ops 2 was december's top game. holiday season sales of personal computers fell for the first time in over five years. the tech industry tractor idt says microsoft's new windows 8 operating system failed to excite buyers. instead, many consumers opted for tablet devices and powerful smartphones instead of pcs. and apple's ceo tim cook says he expects china to overtake the united states as its biggest market. cook is meeting with the head of state this week. they said china fla woornt result to a cheaper iphone to boost its kauptal share.

can, there were reports just a couple of days ago that there were predictions they would be making a cheaper iphone. how do we balance those two? >> more on that story, too. >> it will overtake when? >> he didn't say. >> that's what i mean. 20 years? one year? >> i think it's possible to take just a couple years, right? >> well, if it's a couple years, that would be -- i just want to know, you know, just to say that china will overtake, you know, the united states as our biggest market some day, of course you would figure. but if you're talking 15, 20 years, i mean, china will overtake our economy some day, as well. i wouldn't think that the sheer numbers would make up for the income disparity. >> they don't make enough coupons.

>> you wouldny china buying 400 phones. >> and samsung is getting huge market share. by the way, the coolest new phone you'll ever see in your whole life, they now make a screen that doesn't break. >> what? >> it's foldable, twistable, you can't break it. >> have you broken a screen on your phone? >> no, but people are constantly breaking phones. you drop them on the floor and they break. anyway, amazon is taking aim at apple's i tune store unveiling amazon autorip. it's free versions of music cds they pufr chased. analysts hope it will encourage more people to use the class service. >> how would you know whether you were being a really good

lincoln or not? how do we know how he acted and how he talked? how would you know if someone was a really good -- other than just good makeup? how would you know whether it was good performance? >> it's guesswork. it doesn't sound like daniel day-lewis. >> but they're saying that he is -- that no one should even show um, that is nominated with him because he's going to win. but how do you know he's realistic? >> it is amazing considering he's european and -- >> but how do you know whether -- lincoln could not have acted like that. how do you know he's being a really accurate lincoln? >> i'm not sure you're voting for him based on whether he was an accurate lincoln. >> what are you voting on him for? >> whether he moved you as an actor, as a lead in a film that -- >> i was just wondering. >> the thing with daniel day-lewis, he embraces the role and he looks different. he never looks like daniel

day-lewis in any movie he's ever in. >> all right. i just thought about that. gentleman pap's prime minister -- what's his last fate? ? >> abe. and yeah! the japanese cabinet approved fresh spending of more than $224. a bay says the measures are intended to add 22% to japan's economic growth. he's urging the boj to move more aggressively to encourage lending and meet the clear inflation target. in china, a food price spike pushed inflation to a seven-month high. analysts say that the latest sign that the world's second economy is finally snapping out of its largest down turn. we call it a downturn. let's get a check on the markets this morning. we've showed you a mix.

s&p futures down by .5%. and the s&p 500 is down 1.5 points. dow futures are down about 11.5 points. yesterday was the first time in three days that you saw the major averages. the dow was up by about 80 points. you also saw some big gains. you know what? i'm taking a look at numbers from two days ago. yesterday, the market was up by 80 points. >> dwrur right. >> and a row of gains which is why we've pushed back to these highest levels we've seen in five years. also, take a look at what is happening in europe right now. you're going to see in london, the ftse is slightly higher as is the dax in germany. france, the cac is slightly lower. in asia overnight, we did see the nikkei in japan move up by 1.4%. the hang seng and the shanghai composite in china were both down. oil prices -- this is

interesting. oil prices actually moved up yesterday. this morning, they're giving back a little bit of ground, down by about 46 points to 93.36. oil prices have moved higher in recent days even though people have said they expect to see prices move significantly lower as the u.s. ramps up production in not only crude oil, but natural gas at the end of the year. the ten-year note is yielding 1.894%. and the dollars this morning is up across the board. euro coming in at 1.326. and the dollar/yen is at 88.87. gold prices at this point are down by about $9. 1,669 an ounce. it's now time for the global markets report. ross westgate is standing by in london this morning. good morning, ross. >> andrew, good morning to you. we're pretty flat in european markets as evidenced by the wall behind me. european stocks in general

closing yesterday at two-year highs. the ftse yesterday closing above 6,100 for the first time since may 2008. so not quite the five-year high of the s&p but not far behind. we're seeing the ftse pretty flat as with most of these markets. you have been taking a look at these markets. we saw the 12-month borrowing cost at a three-year low. and today at auction, three-year yield in italy down a little bit. hitting under 2% at 1.85%. they raised 2.5 billion. that is the lowest we've seen on italian auction yields for that three year in march 2010. so continuing lower borrowing costs for italy and, of course, for spain we saw yesterday. now, the -- there we go. 1.9% is the cash market, as well, for italy. today industrial production

coming in for november weaker than expected. certainly everybody is now expecting that we'll get headlines talking about triple dip in the uk. we get ta data out on january the 25th. take a look at dollar/yen, 88.89. we hit earlier this morning 89.35. big stimulus package launched in japan and now the bank of japan, so mr. abe is saying maybe the bank of japan, japanese are saying maybe the bank of japan should target employment. >> before we go to a break, andrew found the answer on the stock funds. in u.s.-based fndz, they had $7.5 million since 2001. if you add it up to the money that went into etfs, it's additional aid. pretty good.

better than a sharp stick in the eye. >> that's a really good depression. so it's good, but i don't know what it means. coming up, why steve cohen's sap capital could be bracing from the big hour of squawk. you can't afford to miss this next deal in congress. it's going hit your take home pay line by line. it's more money than you might have thought coming up at 7:00 eastern time. what are you doing? nothing. are you stealing our daughter's school supplies and taking them to work? no, i was just looking for my stapler and my... this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go... we got clients in today. [ male announcer ] save on ground shipping at fedex office.

welcome back to "squawk box" this morning. u.s. equities at this hour, we have red arrows. dow off about 11 points this morning. the nasdaq off 1.5 points. s&p 500 marginally off about a point this morning. sap capital telling business employees and parter ners it's bracing for employee withdraw. the journal says this is amid intense regulatory scrutiny of alleged insider trading at sac. worth noting, only around 6 billion comes from outside incident investors. the rest is his money. clients have until february 15th to put in a request to receive money by the first quarter of

'10. but the question, once recognizing that over half the money is his personal money, it's not hikely it will shut down. >> his getting out probably has more people questioning it, too. a good reason they would not want to spread this across the front pages of newspapers this morning. as we've been talking about, the s&p is within sight of an all-time high. jeff is joining us from the cme. jeff, you look at this within sight, i think 9 2 points from hitting the all-time of the s&p 500. which way does the market want to go? >> well, becky, it seems like the bulls have the bears as a prisoner right now. we see this market continue to move higher. we see the overnight s&p 500 electronics contract trade up about -6 overnight, but right now it's flat. i think the 1500 is the technical target on the suspect

as we continue to move higher. >> we saw the highest levels since mid 2008. why do you think that is? >> i think a lot of folks are simply underinvested. i think that's the catalyst to continue to make this move higher. it's a timing situation, becky. right now, i think there's a couple of weeks in between the washington, d.c. nonsense as it comes back to the forezone. right now, i think that 1500 to 1530 is going to happen. and folks who are not in the market or short, let's embrace it and get real here. >> they have to embrace it and get real, although we have the debt ceiling coming up and many people who have predicted you could see a pullback before you see things moving higher once again. >> and i agree with that. and i think that's a great opportunity to own volume telt here. it's the cheapest we've seen the vix for some time. for one reason or another, there's complacency in the

market. right now, we are seeing the market continue to move higher. it's a big technical when you see the large hedge funds coming in with the high trading that catch a lot of people off guard. and they did that overnight. i think today you'll see an up session again in the s&p. >> but, jeff, do you think that these are pros putting their money in, do you think these are average individuals who have started contributing to their 401(k)s at the beginning of the year? what do you think is happening? >> i think they're seeing some remorse. some of the folks were concerned about the tax ramifications of this whole fiscal cliff situation. we see nearly a 7% move up in the s&p. so people come back in, but pros are dominating the market. there's a lot of pro money moving big positions around right now and they know time is on their side before the d.c. ding-dongs heat it up again at the end of february. >> thank you, jeff. >> all right, becky. coming up, a live report from phil lebeau.

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good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. the s&p 500 closing at a five-year high and the index is now 93 points off its record close. a log in october 2007. u.s. equity futures at this hour indicated slightly lower after a couple of decent sessions after a couple of lousy sessions earlier in the week. >> our top corporate story this morning is boeing. the faa will review the electrical system. phil lebeau joins us from washington with details on this. phil, we've been watching this closely trying to figure out what it means. >> i think what it means is more scrutiny from the faa because

you're going to have a special review. i wouldn't call it an investigation as much as the faa, especially from the new plane certification department is going to step back and say exactly what is going on here. yeah, it is a safety review by the faa. the faa is not just saying, let's look at this a little bit. it was prompted by the fire in boston. the focus will be on the lithium ion batteries, but the manufacturing process will be under review. here is the important part. the planes will stay in service. this is not the faa grounding the 787 dreamliner. this review is likely to take several weeks. this is not something that will happen overnight. the faa will be reviewing the use of lithium eye on bi ion batteries. this is continue virnl within the aviation industry. and when you look at the dream line ner flight, the specific issue that a lot of the reviews

are going to be focused on is the certification for how long this plane is going to be in the air. it's called the epop certification. this plane is designed to connect mid sized cities across the world. you're looking at a plane that will be over large bodies of water for most of the flight. ask the question becomes, do the electronics pose a safety hazard? taking a look at shares of boeing, yesterday traded around the same area where they have been. but the stock down 1.7%. don't forget, guys, we are going to be over, talking with the secretary of transportation ray la hood when they announce the safety review. make no mistake, this is the faa stepping up big time and saying, we are going to take a special look at the safety of the 787 dreamliner the. >> how often have they done reviews like this in the past? >> i don't know how many times they've done specific special reviews like this, but this is not your run-of-the-mill, hey, there was an incident, let's look at this.

i heen, they're going to be putting together a committee. in some way webs becky, this reminds me of what happened when toyota had the unintended acceleration issues. and the department of transportation said, okay, let's do a review of what's going on the with the toyota models that were in question. but this is not just a run-of-the-mill review of what's happening with the dreamliner. >> are there any air loons who are saying, we're effectively going to ground these planes for a while? >> no, no. but, we should point out that overnight there was a report of another dreamliner having problems in japan. this time with a cracked windshield, apparently according to the report the third time that the plane has had that issue. that plane was taken out of service or at least it didn't make that flight that day. but, andrew, there has not been any airlines that have stepped up and said we took the liberty of this plane but we don't feel confident at this point. they're still flying them. >> at this point, there's political concerns with the f

aaa, too. if the faa didn't do anything, then they would be a month or two from now, if it will continue continue, they would say why is the faa, so there's a little cya at the faa. >> they signed off on this, joe. they signed off on a lot of technology and processes that were new. >> and i think boeing is probably like ge, a six sigma -- you remember some of the number that's we used in six sigma, phil? it has to be three failures out of 10 million or something. with a lithium ion battery, i don't think you could accept three failures out of ten mill, could you? you have to have zero failures. >> right. and the other day when boeing held a conference call and the chief engineer for the dreamliner came out and said, listen, we've got over a million miles with these lithium ion batteries. this is the only incident.

there are other electronics issues, whether it's the electrical panel on certain dreamliners that have been failing, whether or not it's a plane losing power. that's under review. but it's not like one is separate from the other. >> i just like it when i can get you to say battery peps it's a chicago thing, right? >> i'll do that if you tell me you're a six sigma green pelt. how about that? >> i never did get any training. but it was always -- applying six sigma to a news conference was always fun. i look at the teleprompter and it's like, wow, we just violated every six sigma rule. it's tough for a broadcaster. it's a great system, but it scares me when you think about that. you basically have to have, with airlines, a zero failure rate on almost everything that you have. and that's tough. >> and, joe, let me point this out. all the airlines flying the dreamliner, they have gone to great lengths so far to say that this plane is meeting

specifications. in other words, when you buy this plane, you want to know what it's going to do in terms of fuel efficiency, burn rate, etcetera. it's meeting those specifications. that said, when you've had this many incidents, it's going to prompt a review like this. >> we're going to talk again as we get closer to 9:30 or so. thanks, phil. and recent data is suggesting china's economy may be turning a corner. pina devaro is an economics professor at the university of california and director of the film "death by china." so "death by china," they're back on track. does that work for us? that's better for us, isn't it? >> joe, you've got both europe and the u.s., china's two biggest customers. we've settled into a lower growth path. and it's really not enough to sustain china's export dependent economy over the longer term. so what they have to do, basically, is to boost up their consumption sector. and that's going to take some

structural reforms, joe, that they've seemingly been unwilling to take so far. >> we've heard that. they got a ship on the exports consumer. they made some progress trying to do that. it's not going to be that easy. they're -- what is the average per capita income now compared to us, too? what is it, is it $10,000 or so compared to 40 or 50 in the west? >> well, the problem is that you can't really use the same metric in china because you've got a relatively small sliver of the population. wildly wealthy and getting wealthier. and then you've got everybody else, including 50% of the population still are peasants and farmers. but what they need to do, joe, it's pretty simple and they've said it twice now on the five-year plans is to reinstitute health care and pension plans for the people so that they'll save less and spend more. if you're in china without

health care or pension, you're putting all your money under the mattress and not spending money. those are the two biggest things. the other thing, the undervalued currency that they use to take our jobs is yet the chinese don't have a lot of purchasing power. if you let that currency strength.the fuel costs would be lower, the food costs would be lower. it's going to be really interesting this year with the new leadership because we're already seeing some censorship issues and people kind of uprising. so they have to deal with that. >> but the -- if you had to guess in -- as far as quarter gdp, the lows that have been seen and they're -- we will see higher year on year gdps? >> i would agree with that, joe. and i would agree with the observation that somehow -- i don't know how they did this. they avoided the real estate bubble busting. which is huge for that market.

in that market point of view, or the way i like to price china because i don't like to do it directly for social responsibility reasons is to basically play aus trail use, the commodity countries. with china's boom in australia and brazil, i think through 2013 it will be a great year. it's going to be one of the best returns we've had in probably 13 years for corporations that are learning basically how to make money in slow growth economies like the u.s. and europe by going into emerging markets. we've got this fracking thing going on which is the biggest thing happens in 50 years in the energy industry for lowering costs. i'm bullish. but china, they have to come to terms with their export dependsy. >> so you're tenured at ucor vine? >> i've been there for 25 years, joe. >> uc ervine?

>> it's so hard, joe. you're having a real tough time there digging trenches. >> hey. we're in englewood, new jersey, buddy, so you've got nothing on that. >> been there, done that. i love the mothership. >> laguna is how far from you? >> i can't complain. i'm not complaining. >> you've got a lot of traffic. that's what i'm hanging my hat on. >> there you go. not at this time of morning. >> no. see you later. >> take care, man. coming up, what do hedge funds and advertising agencies have in common? more than you think. how they're invading madison avenue. that and is more when we return.

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squawk is back. he's changing madison avenue in the process. he's an optimization engineer with choice stream. it's good to see you. saw you on the cover of ad week this week. it talked about you and others who went from wall street to madison avenue are taking the strategy to change the world of advertising. >> yeah. thank you for having me. it's been an interesting journey. i studied a lot of math in college and had dreams of applying that mathematical knowledge to wall street. i got to wall street in the form of a job at bank of america and their debt capital groups. i was an analyst there for two years, but about a year in, i realized that there was something missing still. there was a creative aspect to the job that i didn't really find to -- i didn't really find at any job on a day-to-day

basis. so i started looking for realms of opportunity elsewhere, particularly in technology. >> explain what you guys are doing with advertising in terms of the algorithms that you're building and what it all means. i was joking the other day -- i'm sick, so i was looking for a humidifier online. and now wherever i go, by the way, whatever website i'm on, there are ads for humidifiers everywhere. >> absolutely. so what you're alluding to is kind of the advent of what we call in the industry realtime bidding. realtime bidding is an incredibly exciting opportunity for targeting purposes, at least. it's a technology that has risen, really, over the past couple of years to dominant. what it allows us to do is to target individual users on a realtime basis. so before every page load, there's a little auction that happens based on, you know, various attributes about you and about the time of day that it is and about the type of site that

you're browsing. you know, all of those brackets are taken into consideration and valued at realtime and the highest bidder wins your impression. >> and so yours is -- the type of algorithms that you're designing traditionally do what? >> traditionally, so the type of algorithms that we are designing try to take all that information if realtime and within a couple of milliseconds return a response to -- in the form of a bid. so we're basically trying to do take all those factors based on our historical data value your impression based on the probability of you buying that humidifier or buying those pair of shoes. and commit a bid based on that. >> let me ask you a question about the pricing of all this. this has always gone almost ebay style. almost every add you've seen these days you are bidding almost like an auction. and it seems to me that ad prices online are going up, but

they continue to go down. and what does that mean for the media business? >> it's at great question. ad prices not everywhere are going down. it hones in on the price discovery which is something that i learned a lot about on wall street, as well. i think that, you know, advertising on, you know, for a high quality users and for people who -- for high quality users relative to the brand, there will always be a premium price paid for those users because those users are invaluable to brands, not necessarily invaluable, but valuable to a quantifiable extent. so it's all -- it's not necessarily about prices overall going down, but prices for less useful users for brands going down and is prices for the right users going up. >> so there is still a premium. the premium question is a big one and the reason i ask is if you need to sell a huh might phier to me, i imagine you don't care whether you find me on cnbc.com, the "new york times" many come or fandango, and i

would imagine the costs for fandango are less than these news organizations. >> yeah. that's partially correct. it largely depends on the context. we -- at choicestream, we do take all of these factors into consideration at the time and so it depends on your intend has to be valued in conjunction with the context that you're on. so if you are someone who has been shopping for humidifier hes ravenously, as i assume you have been, that is taken into consideration and, you know, in our algorithms, that would be weighed heavily versus the content if you were a users who had been shopping humidifiers less ravenously you would be seen as more valuable on premium sites, potentially, but less valuable on less premium sites. >> ben, we're going to leave it

there. we appreciate you getting up early with us and congratulations on being on the cover this week. >> thank you very much. when we come back on "squawk box," the business of wine. we will talk commodities, spending and much more with one of the nation's largest wineries. and then in the next hour, the man who warned us of a looming crisis long before anyone mentioned the fiscal cliff. david walker will join us live at 7:00 eastern. i plugged in snapshot, and 30 days later, i was saving big on car insurance. with snapshot, i knew what i could save before i switched to progressive. the better i drive, the more i save. i wish our company had something this cool. you're not filming this, are you? aw! camera shy. snapshot from progressive. test-drive snapshot before you switch. visit progressive.com today.

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jackson family wines is the second largest family owned and operated winery in the united states. joining us right now from california this morning is the company's president. rick, we want to welcome you. people may not know the name jackson family wines but they certainly know your wines which are kendall jackson. it has been a huge brand for decades at this point. why don't you tell us a little bit about what you're seeing from the consumer right now when it comes to how much they're willing to spend on wine, how much they're willing to drink it? >> well, i think in the wine industry, it's a great time to be in the wine industry. in the last two years, really the consumer has stayed with us the entire time. you know, for kendall jackson, the brand like you just mentioned has been the number one selling chardonnay for the last 20 years and it's been at various price points. today in the wine industry, you really look at demand over supply, and you really demand is up in all price categories. so the consumer is continuing to spend on lifestyle wines like kendall jackson, or the other

parts of our portfolio, as well. >> did you ever see a downturn back in 2008-2009 when the recession really came on, did people stop buying the high end brand? >> oh, yeah. we have a wide array of products. we sell wine from $10 a bottle up to $400 a bottle. right after '07 you could see the really over $50 bottle of wine category almost came to a stop. and here we are really almost five years later and it's just now starting to come back in bits and pieces. >> rick, do you say la creme is that your brand? that's my brand. >> actually, i love that brand. >> that's my brand. you know, something happened to the pinot noir. i have been unable -- was there an accident? what happened to the pinot noir? it's not in the liquor stores right now for some reason back here. >> wine is an amazing phenomenon. it's ag product. so really you look at the '09 wentage and the' 10 vintage and' 11 vintage.

we've had really tight vintages. it's been an allocation for really like the last two years. the great look is in the '12 harvest. >> the pinot noir and the chardonnay. i didn't know kendall-jackson -- >> it's one of those things where we're actually called jackson family wine. so we probably have 25 wineries, so we own wineries like kendall-jackson, like la crema, brands in napa. we also have, you know, wines that we own around the world, as well. so we're a relatively, you know, good-sized family business. >> i only got one question, it's a stupid question, like a lot of them are. so i can buy a pinot with a twist off? how do i get past the idea -- >> i love the twist off. >> i can't do it. i feel like i'm -- i feel like i'm tringing apple -- at a party. if you serve a twist off don't people look at you like -- >> no!

>> stays better with the twist off, right, rick? >> joe, you got to get past that. >> i do? >> yeah, you do. >> you're not going to make -- >> no, we don't. but actually we're coming off with a pinot gris this may which will be down from monterey and it will actually have a screw cap. so get past the cork thing. america loves the cork because it's traditional. but the screw cap is a really good closure. >> and it keeps it, like sometimes the cork gets bad, and then it ruins the wine. >> i smell the screw top and i cut myself. people think i look like an idiot when i do that. don't smell them. >> we want to thank you. >> don't smell the screw cap. >> thank you for bringing us up to speed and educating us on some of this today. we'd love to have you in studio, maybe talk a little bit more about how you've been hiring and how things are impacting. come back again. >> thank you. >> coming up the faa set to announce a special review of boeing's dreamliner. we will ask an analyst about itu power consumption in china, n

impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. with investment information, risks, fees and expenses living with moderate to semeans living with pain.is it could also mean living with joint damage. help relieve the pain and stop the damage with humira, adalimumab. for many adults with moderate to severe ra, humira is clinically proven to help relieve pain and stop joint damage. so you can treat more than just the pain. humira can lower your ability to fight infections, including tuberculosis. serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. blood, liver and nervous system problems, serious allergic reactions,

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a payday pay down? >> i didn't receive my paycheck this week. >> you're going to have to talk to payroll about that. >> what you need to know when you look at your pay stub. >> who's feick ka? yz he getting all my money? >> we will go line by line on what this means for your money. putting the u.s. house in order. former comptroller david walker joins us today. >> and investing abroad. where to put your money on opportunities around the globe. the second hour of "squawk box" starts right now.

good morning, welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with joe kernen and becky quick. take a look at futures and see how the market is setting itself up today. dow off nine points, nasdaq off a point and a half and the s&p 500 off just marginally. the s&p 500 did close at a five-year high and it's now 93 points off its record close logged back in october of 2007. so that's something to watch as people make their charts this morning. other business headlines today. the 787 dreamliner has been hit by two more mass happens in japan. there's been a cracked cockpit wind window, and an oil leak on separate flights in japan. the late nest a series of insy tests to test confidence in the sew fis indicated new aircraft. no one was injured in either incident. the faa is now, though, expected to announce a special review of the power system for that aircraft. that announcement expected today. and c cnbc's phil lebeau is going to have more on that story in just a moment.

also american express announcing it would cut about 5,400 jobs or 8.5% of its workforce. the company -- credit card company is taking steps to restructure its business and pay legal bills. and finally, wells fargo is expected to report earnings in just about an hour. analysts are looking for at 89 cent's share on revenue of just over $21 billion. but now let's get to joe and more on the dreamliner story. >> a bumpy week so far for boeing. and the 787. and now the aircraft will be under more scrutiny. phil lebeau joins us now from washington. and on your last report, phil, i kind of walked -- i witnessed you walk what say pretty fine line because you certainly are not saying it's not a big deal, because it is a big deal. but then again you're keeping it in perspective for what it is. >> keep in mind this about the special review that we're going to see the faa conducting, joe. the faa has been working with boeing for several years, as the dreamliner was being developed, and first was being

manufactured. it's not as though boeing built this plane and then said to the faa, come on out to seattle, take a look at the plane and tell us if you think it's okay. they've been involved in the process all along. so, in some ways this is the faa going back and saying, did we get everything right? or did we miss something? or should we change something? here's what you need to keep in mind when you look at this special review by the faa. the focus is going to be on the electronics of the dreamliner as well as the lithium ion batteries. that's the key here. the use of electronics inside this aircraft is far different than it has been in previous aircrafts. the manufacturing process is also under review. one last point here. the planes are staying in service. and this is an important point, because if this was a safety issue, where the faa was looking at the dreamliner and saying, whoa, we got problems, we have some planes that may not be safe to fly, they would ground them. they would issue an air worthiness directive. that is not what is happening here. at the other end this is not just the faa saying okay, we've got a few issues here, this is a

special review where they're going to be working with boeing and boeing engineers -- by the way, boeing engineers, this is a willing participation by boeing. it's not as though they're calling boeing into the office. boeing is saying yeah, let's sit down and look at this issue together. as you take a look at shares of the boeing, one thing to keep in mind, this review is likely to take several weeks. so we see the headline risk that's likely to be there for boeing. the press conference happening later this morning may just be the latest mark is what we're going to see over the next several weeks where the dreamliner is going to be back in the news on a fairly steady basis. you have to wonder what kind of an impact that's going to have on shares of boeing. >> did al nippon take more deliveries than any other airline? >> they were the launch customer. so yes, so far they have more than others. i don't think that they have the most orders. i'd go to have back and check this. but you know, it's a gradual process, where -- >> saying al nippon every day. that's the thing. so that's where -- right? >> you love saying al nippon.

>> no, i don't mind. i wondered why it -- >> you wanted me to say elle nippon. >> other, otherwise like maybe their maintenance stinks. if everybody had an equal number of 787s. >> oh, no, i don't think that's the case here, either. again, we'll learn more today when the faa -- >> you just did it again. you showed it's not business as usual, this is a big deal, but none of the planes have been grounded which takes away from it being a super huge big deal. >> yeah. we're not talking about a d.c. 10 issue, you know many years ago when they said shut them down, that was a huge issue. this is far different. >> okay. >> all right, phil, why don't you stay right there. we're going to talk more about this. before we do, some news crossing the wires. best buy is out with its sales for the holiday season and the numbers at this point look like they came in in temps of the comp store sales. down 1.4% from the total company on a domestic basis, it was flat. but on the international basis it was down by 6.4%. a lot of questions that have

been circulating around this, because richard schulze, the founder of the company, had been trying to line up investors to take the company back. a lot of people said that what happened this holiday season would be the key as to whether or not he'd be able to line up investors. you can see right now the stock is down by about 1.7%. there is more news in this. the company does say that it was able to deliver on its cash flow numbers that were there. but if you were looking for a big surprise to the upside in terms of the sales you're probably not going to be getting it in these numbers. we'll continue to keep an eye on shares of best buy. can you see right now the stock just turned positive, up by 1. %, it's been fluctuating. down by as much as 5% since the news hit in the last couple of minutes. people are going to be digging through a lot. there are some comments from the ceo who says that while it will be a journey with ups and downs we are focused on becoming an increasingly effective multichannel retailer and engaging with tens of millions of consumers who shop us online and in store. they did say they had some strong traffic growth in online

business. so we'll see how the market continues to react to this news. let's go back to the story about boeing, though. this is one of our key stories of the morning. joining us right now from denver is aviation expert michael boyd. the president of the boyd group. and michael, try and set this for us in some sort of a perspective. how unusual is it to see the faa doing something like this? how big of a setback is it for the company? and just based on what you know so far, how big of a deal is this? >> well, it's a brand-new airplane. has a brand-new production track. different composite materials. so it's incumbent upon the faa to look into it. this is a normal thing like phil just said. the reality is, is it going to harm boeing? not in the long-term. i would maintain it's far as a boeing is concerned. there were probably 40 airplanes yesterday that had engine oil leaks but the only one we heard about was the 787. it's a big deal because it's a new airplane, high profile airplane, as phil just said this is not something that is life

threatening. what they're going to do, working out these glechs. >> so as somebody who follows the company, we've seen people share -- sell the shares over the last several days. is that the wrong move in this situation? would you think people should just stay pat and see what happens with this? >> oh, this is not life threatening in any way to boeing. this is pretty much what would be expected. and as far as boeing goes, remember they've overtaken airbus now in terms of sales, currently. they have to gear up to deal with a new threat from lombardia up in canada. this is just one part of boeing's business. they're a really strong company. >> what would make you change your mind? is there something that could happen, some headline that you get, some news from the customer, something they were saying that would make you say, wait, this could be a little more serious? >> oh, sure. if this was a, god forbid, a repeat of the british comet in the 1950s where there was a severe problem that would basically ground the airplane for a couple years, yeah, that could be a hit to boeing. as well as to airlines that have

geared a lot of their flying around the capabilities of this airplane. here in denver, you could never fly to tokyo without that airplane, united planning on it now. if that airplane got grounded, boeing would be in a lot -- >> mike rl you concerned about lithium ion batteries in airplanes? >> no -- well, no, you hear that all the time. some airlines announcing you can't carry them in your bag, that sort of thing. i think they're going to work through that. but there have been incidents with those batteries catching fire, i mean we've even had deaths from what i understand on some cargo airplanes because of lithium batteries. but like phil said, if it was something that was life threatening, the faa would step in it right now. >> what has the company said, if anything, what's the latest commentary they've made about all this? >> they're issuing no comment right now regarding the faa review. we do know that they're going to be working with the faa. there will be boeing engineers working side by side as they review the process here. i think woeing is in one of those positions, becky, where the headline risk is there, and about the only thing they can

say is what they said the other day which is, high, listen, we stand by the way this plane was designed. we stand by the use of lithium ion batteries. now if that changes we certainly will hear more from the company. but at this point i think they're taking the approach of, they believe in this airplane, and they're not changing their stance. >> michael, you bring up a good point that the carriers have a lot invested in this, too. they have made long-term plans on this. i have invested money and invested their strategies for all of this. which airlines have the most at stake? >> it's going to be airlines like long-term like united, like american. if those kinds of carriers that have looked at whole new revenue streams that can be generated by this new airplane, and if those revenue streams aren't there, they're going to have to restructure themselves. it's been a hit for airlines ever since this delay. the chairman said how did you like your flight on the 787. i said it wasn't. he said that's my point. it's hurting airlines. if there's any kind of further delay on this airplane. >> michael, that's a good point

that the customers are just as tied up in this as boeing is. michael and phil, thank you very much. phil we'll check in with you a little later. >> coming up next we're going to welcome our guest host david walker for the remainder of the show. plus it is pay day. millions of americans are opening up their checks today, most likely, though, to get a little surprise. and the bad news is it's less money. we've got details about all of that after the break.

it is payday for a lot of people across the nation today. if you think your check is a little less than usual, well, are you not alone. you are, in fact, correct. c incomes's eamon javers is here with more. this is a nice new year's surprise for people. >> that's right. a lot of people followed all the debate over the fiscal cliff and they were relieved to hear that taxes were only going up this year for the rich. well, they were wrong. because neither party wanted to defend it, the temporary payroll tax cut enacted under president obama died at the end of 2012, which means that everyone in the country will see a bigger tax bite out of their pay check this year. so when you get your first check of the year, look at the amount charged under fica.

you're going to be paying more than you did back in december. how big of a bite is it? for many middle-class workers it will work out to a trip to the grocery store or a tank of gas less every two weeks this year. here are the numbers. for a single person making $60,000 per year who is paid biweekly gross income in a pay check is $2,307.69. in december, you'd have had to subtract from that federal withholding taxes of $403.56, fica taxes were $96.93. medicare was $33.46. state withholding for a person like me who lives in maryland was $177.35. so that gives the taxpayer net pay in one check in december of $1,596.39. so, what happens this month? gross pay is the same, as are the medicare and state taxes. but fica taxes go up sharply. to $143.08. that's $46.15 in a bite from the

political decision to allow the payroll tax cut to expire. but here's the good news. federal withholding from this pay check is going down by about $4 to $399.18. due to the way the federal government calculates inflation. that gives our taxpayers net pay of $1,554.62. for $41.77 less than he or she made for each pay check back in december, and that money could have gone to those groceries or that tank of gas. >> eamon, thank you. wow, i didn't realize the federal withholding went down by $4. >> that saves you a little bit of money, right? that's the cup of coffee you get while you're getting that tank of gas. >> although i have to say, anybody who is complaining about this so-called tax hike, that was always supposed to be a temporary tax cut. if we want to fund social security and you want to make sure you still have the benefits there, these are the type of things we need to get used to.

>> that's why both democrats and republicans agreed that that was a tax cut that should go away this year. neither party loved that thing. it was temporary. and now it's gone. >> i don't even count it as a tax hike honestly. this is just the return to normal. >> right. depends if you're grover norquist or not. any time taxes go up anywhere, in washington they're saying that's just a tax hike no matter what. >> we've got somebody here who is going to talk a lot more about this. david walker is signature on set. eamon, thank you. people are going to be on the lookout for this in their pay check. >> from repercussions of the fiscal cliff to the debt ceiling there's nothing we can't talk to david about. he's founder and president and ceo of thecomback america initiative, former controller general of the united states. we'll talk to you about if you're feelings of jack lew in a moment. on the deal that we did. you see everybody's taken the zeros off of what we owe and everybody's seen that now. i guess we're making $23,000 a

year, we're spending $38,000. so we're adding $16,000 to our credit card bill every year. and we already owe $160,000 on our credit card bill. and the fiscal cliff deal cut $38 off of our expenses or something when you take everything off. is that -- >> actually worse than that. >> how can it be worse? >> actually our cliff bill was an absolute embarrassment to the united states of america. let me clarify. if we had gone over the cliff, it would have been an "f." and a total failure of our system. but when you analyze the bill, it was an "f" on spending. we actually increased spending. we didn't reduce 13e7bding. we increased spending. >> all the democrats tell me that there was already a trillion dollars of spending cuts that -- i didn't -- >> that was from august 2011. okay, but what i'm saying is, if you just look at this bill in isolation, it increased spending. it was an "f" on spending reduction. >> okay.

>> it was a "b" on tax reform, absent -- tax reform. a lot of things they did was consistent with the private advice i gave to both sides of the aisle but they punted on all three of the big issues we have to deal with in order to put our financials in order. they punted on social health care programs, and tax reform. now what we have is three mini cliffs set up, we have a debt ceiling on it. we have the sequester which was only delayed. it won't eliminated. and we have the continuing resolution to fund government for a year. the key is what's the strategy going to be to deal with those issues? and how can we get a grand bargain in 2015? >> okay who's got -- i heard yesterday roger altman was saying that the republicans have some leverage because of the sequester. and that they'll be able to use it. it hasn't appeared that the obama administration or democrats really are

acknowledging that so i've heard they're going to go right back to the well because they only got $600 billion in tax increases. they want, supposedly, $1.2 is the president coming down on his initial demand of $1.6 or whatever. so we need to -- we need to come back to the well on tax increases, and double down on what we already got. without -- and i'm not hearing anything about spending cuts. >> well, first, our problem is primarily a spending problem. >> you've heard what they said, though. >> what the truth is -- but the truth is we're going to have to have more revenues than this last deal. and by the way, the truth is also, you're not going to be able to confine it to people making over $200,000 and $250,000 a year. the numbers don't work. look, here's -- >> eamon just said -- >> why is that the case? you're saying it's a spending problem. and -- >> primarily a spending problem. here's what we need to do. look at all the deals that have been done. august, 2011. this fiscal cliff deal.

whatever is done from this point forward, we need to to achieve, because we delay simpson-bowles, $4 trillion to $5 trillion in deficit reduction over a ten-year period. and, be on a path such that debt as a percentage of the economy could be stabilized, hopefully go down, but at least stabilized at that point in time. so what you have to do is you have to look at the aggregate of actions that have taken place. but then we have to make sure that what they agree to actually happens. they agreed to this sequester. now they've delayed it for two months. how did they pay for it? half through revenues. half through spending reductions. so, here's where we're at. in my view, the republicans should not use the debt ceiling limit as the basis of leverage. they should use the sequester, and they should use the -- they should not use a long-term extension for the debt ceiling. they should extend it no longer than the end of this current calendar year. we need to do a grand bargain in 2013 and we can talk --

>> we are getting further and further away from not only grand bargain but also any sort of tax reform that simplifies the system. eamon just showed us was crazy, the idea that federal with holding goes down by $4 because of some inflationary index that goes along with that? >> right, right. what we need to do is get confidence in tax reform that makes it simpler, fairer, more competitive, and generates more revenues. we also have to have social insurance reform and we've got to focus on health care reform. >> david, the morning money e-mail this morning highlights a report from left leaning group, center on budget and policy priorities from richard keoghan and he argues that all we need to do is do $1.2 trillion in deficit reduction, either through spending cuts or increases he thinks $1.2 is the number. if you want to stabilize the debt at about what he says is 73% of gdp over the latter part of the decade. does that make sense to you? because if that's what he's coming out with he's clearly suggesting to certain folks in washington that we don't need a

type of grand bargain that you and some other people have been talking about. >> he's wrong. the fact is, is that from 1492 that the earth is round not flad. it's time that we move away from flat earth budget where all people are doing is looking at ten years when in reality, because of known demographic trends, 10,000 people a day el gin to retire, okay, for the next 17 years, rising health care costs, you just can't look at ten years. that's why baselines are b.s. and we ought to get rid of baselines. we need to focus like a laser on debt-to-gdp. we need to get debt-to-gdp down to about 60% within the next 12 years and we need to make sure that we're on a path to keep it there, given known demographics. >> we heard yesterday a sequester gets us to 3 trillion on spending cuts that simpson-bowles was looking for three to four and the sequester will get us to three. we're almost there. >> look, again, we can't use flat earth -- >> that's the same-ish.

>> it's the same kind of analysis. okay? you have to deal with known demographic trends and rising health care costs. i was -- social security and medicare. >> right. >> and i agree with you, by the way, that we should have allowed that to expire. >> the payroll tax cut? >> absolutely. no question about it. >> it goes to fund social security. >> social security is already negative cash. >> right. >> and if adding the deficits, and -- >> you were disappointed -- jack lew does not mean that this guy is coming to the bargaining table with republicans. >> well, look, jack lew is a very capable professional. he's clearly qualified for the job. he's got extensive budget and financial experience. but he does not have good relations with republicans. that's a fact. okay? and if you want to get a grand bargain, i think one of the things that's more important than ever, and if you really want to transform government to make it more future focused and results oriented, the omb is going to be key. 9 omb pick is going to be key. >> okay. david's going to be sticking around, and maybe talk a little bit more about some other names

that work at treasury. coming up, stabilization in europe, positive data from china. are these signs the global economy is going to make a comeback in 2013? we're going global to find ways to make you some money. checking futures right now. you can see we do have red arrows. dow looks like it will be off about nine points. s&p 500 off almost unchanged same 24i7k with the nasdaq. earnings from wells fargo at the top of the hour. at 1:45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card at getwellduck.com.

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serious allergic reactions, and new or worsening heart failure have occurred. before starting humira, your doctor should test you for tb. ask your doctor if you live in or have been to a region where certain fungal infections are common. tell your doctor if you have had tb, hepatitis b, are prone to infections or have symptoms such as fever, fatigue, cough, or sores. you should not start humira if you have any kind of infection. ask your rheumatologist about humira, to help relieve pain and stop further joint damage before they stop you. we asked total strangers to watch it for us. thank you so much. i appreciate it. i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money? if your bank takes more money than a stranger, you need an ally. ally bank. your money needs an ally.

coming up next, the s&p 500 closing at a five-year high. can the rally continue? you've got to find out in our trading block. it's coming up right after this break. ♪ [ male announcer ] some day, your life will flash before your eyes. make it worth watching. introducing the 2013 lexus ls. an entirely new pursuit.

now the answer to today's aflac trivia question -- welcome back to "squawk" and the headlines this morning.

s.a.c. capital reportedly telling employees and business partners that it's now bracing for client withdrawals of at least $1 billion this year. that's nearly 17% of the money that it manages for outside investors. this comes from a report in "the wall street journal" which says it comes amid intense regulatory scrutiny of alleged insider trading at s.a.c. stephen cohen's firm manages $14 billion in total but let's give you a little context here. only around $6 billion comes from outside investors. clients have until february 15th to put in a redemption request for seed money by the end of the year. but all of those questions about the future of this firm, given the amount of personal money that he has tied up in this firm to the extent that anyone would speculate that they were going out of business, that is just about impossible. >> and video games, retail sales of video games and gaming systems fell 22% last month, and capped a year of declining sales for the industry. call of duty block ops two from active igs blizzard was december's top game. >> also holiday season sales of personal computers fell for the

first time in over five years. tech industry tracker ibc says microsoft's new windows 8 operating system failed to excite buyers. instead many consumers opted for tablet devices and powerful smartphones instead of new pcs. >> well, the first full week of trading for 2013 comes to a close today. let's talk about your tools of the trade. joining us to talk gold prices is tom o'brien the editor of the gold report. on the dollar and other currencies we have boris schlossberg, and cnbc contributor and on equity markets joe kenahan of td equity. joe, you see the s&p in another five-year high again yesterday and looks like we are closing in potentially on the all-time high. i think there's just over 90 points to go before we get to that. what's driving things right now? and where do you think the momentum is? >> well, i think in terms of the momentum's obviously higher. the level of 1483.55 on the cash, or you know you guys have the s&p future up there in a

fair value. about 1476 on the s&p 500 future. will be the next level that we run into in terms of resistance. if we can break through there, many think we'll get above 1500, 1502 or so. one of the big things this morning you talked about it already today becky is going to be wells fargo earnings. and the reason being alcoa kicks off earnings season. but, we're not a manufacturing economy anymore. you know, a financial and tech companies, those are the ones people are really looking to to continue to set the pace. so wells fargo earnings i think in terms of traders really does set off the earnings season. a lot of eyes on that. if we look what we're expecting about a 2.5% move out of wells fargo right now. and yesterday's options action we saw quite a few people selling some puts, buy being some calls. so it will be interesting. seems to be a bullish tone going into earnings also. >> well, you might expect it given the turn or at least stabilization of the housing market, considering how big that player in the housing market. but a lot of it has become, joe, from what they're saying, on the

call in terms of what they expect for this current quarter. >> absolutely. that will really set the tone for the rest of the earnings. the one other thing i have to point out is the vix closed just four cents above the lowest close we've seen in 5.5 years. and if you look what happened last time we were there we kind of stayed in a tight range on the s&p about 20, 25 points and then we moved a little bit higher. so it will be interesting to see also if history does repeat itself. we have a little bit of capitulation at this level. >> boris is this going to be the year that the euro really gives back some ground? >> maybe not, actually. because one of the things that happened yesterday was that mario draghi kind of reset the correlation between risk assets and euro. if you note the last couple of weeks we've had a big divergence where equities vr been rallying and europe collapsing. yesterday draghi said basically he thinks the situation in you're row zone has stabilized you saw equities and eurozone rally. you see the euro break highs of 33, 34, maybe go to 3500. >> how is that possible, though,

based on draghi's comments, no problem, there's nothing to see here, don't worry about it? how does this not come back. the problems haven't been solved and if you look to spain's unemployment rate, how that's continued to soar, how do they get themselves out of this thing? >> the assumption basically is that the financial situation within europe has kind of stabilized. the periphery borrowing rates have come down substantially. >> that's true. the ten year has come down substantially in italy and spain and other places. >> exactly. you're actually right. to me the single biggest risk for everybody right now is not economic or political. we're actually doing relatively okay in most of the key spots. i mean, europe not withstanding but u.s. is doing okay and china okay. we can maybe pull the rest of the world up if we can go through the debt ceiling sequestration and the european elections without much trouble. that's going to be the big if in the next couple of weeks. >> what you're saying is the economy is churning along no matter what it's kind of hard to knock this thing down? >> but the politicians could really do it. that's the problem.

that is the businessest risk. right now the risk s political not economic. i think you have a big correction coming down. >> david? >> how about the issue that europe hasn't really really recapitalized all of its banks yet as the united states has, and what, if any, risk and exposure do you think that represents, and impact on potential growth opportunity? >> no doubt still risk although they basically are trying to sort of create a lot of -- sweep a lot of bad banks under the rug right now. they are moving towards the one key thing a lot of investors want to see which is centralized europeanwide banking regulation. if they can achieve that, of course, everything in europe moves very, very slowly. it will be a positive and investors will take with them. >> tom last year's gold's performance surprised a lot of people. what are you expecting this year? >> good morning, becky. i'm still -- we've been in a correction for two years. you know, we're at 1660. i'm looking to go to 1550. and why? you know, this dollar wants to go higher.

that's, you know, that's the basis that i'm looking at gold, the dollar. now, the shock in the water. you've been talking about herbalife the last few days. everyone knows that paulson is the biggest owner of gold. the actual physical gold and a lot of the equities of the bottom line is unfortunately he's down quite a bit other sharks are going after him. you look at his stocks you don't know what funds are selling them, they're coming in to him big time and they know he's got to sell they know he owns 5% of the gld and this isn't over yet. and it's really large hedge funds against large hedge funds. there's another thing that has happened in the gold market. fidelity last eleven years has been the biggest buyer in every equity. these are down 20%, 30%. fidelity's been missing in the markateplace. my take is probably soros on the other side of paulson. until fidelity comes back this is still a consolidation.

we had a huge run from 16 -- 666 to 1900, consolidation, it's not over. >> that's really interesting. you say it's not the central bank. the big hedge fund players who are kind of ganging up on each other. >> it is. and you know, bloomberg can pull up the portfolio display. and when you see it in gold market is small. i see it, i track it, i'm tracking for 15 years. it's easier than people think. and when those other big players see it, they're squeezing them. i think they're squeezing them big time right now. his stocks are breaking lows with huge volume. yesterday, it was one stock was just dramatic. it's a big deal. because they know what he has. i don't know what the redemptions are but other people probably do know coming in. and that is -- >> what was the stock breaking lows yesterday? >> au. au is in trouble. iag is in trouble. gfi is almost out of -- these are someone is going after these

stocks. you're talking about breaking lows and breaking them with big volume. someone is on the other side of it. >> s&p and gold are both going up 1500. and then the shocks are going to come in. >> that's right, joe. the shocks are going to come in. >> the shocks are coming in when they're both at 1500. i don't know which is going to get there first. >> listen -- >> you were saying like an electrical shock or a shark that's swimming around and then i finally figured out -- >> jaws. >> jaws. >> listen you went to m.i. tchblgt. you know what boston talks like. we're the only ones that talk correctly in this whole world. >> don't bring me -- don't bring that up because i saw ted and there's a -- my kids were watching unfortunately and they saw a scene where they're going harder, harder, and -- >> then you shut it off. >> and i shut it off. >> not family viewing, joe. >> no, it was not. it was not. not for me, either. i had to change it. >> joe, that was voted one of the ten best movies. >> it's funny.

if you're, you know, that's what cut me out. but for adults it's okay. and i think it was a universal made it a big hit. >> appreciate your comments with regard to the pressure on gold pricing here in the short-term. but given quantitative easing and given the fact that u.s. new year the country still haven't put their financial house in order what do you see as the longer-term for gold? >> after we get down -- >> -- investors. >> 250 to me would be the next move higher. you know, what has happened the last 12 years, we've had two large two-year consolidations after big runs up. that's what we have right now. once this gets flushed out and you know the squeezing gets done down to 1550, 2250 is like two or flee years from now will not be a big deal. what has also happened is this. gold has got its place back in allocation models. if you look at renaissance technology, jim simons, if you look at a couple of these other large funds they have small positions in gold. to me that's just an allocation

that's actually back in the marketplace. it's not going to leak. it's in the market place, now. i'm not a gold guy for 5,000 but 2250, a couple years from now, that's in. all right, tom, boris, joe, guys, thank you. >> up next, we are going to go global. now the time to look overseas for profits. it's contagious just like the flu or is america the place to be putting your money to work? we're going to find out next. and watch best buy this morning. the company says holiday sales were down 1.4%. the company's ceo making some comments about the state of the business. we'll get you some more details on the next -- in the next half hour. "squawk box" will be right back. we've got nothing to do with jobs. just the shock. are you tired of waking up like this? why not start your day with joe

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european central bank head mario draghi says he sees signs of stabilization, china showing signs of a turn around in wealth. is now a time for investors to set their sight on opportunities overseas? joining us from boston is fidelity global strategy's coportfolio manager. where is the most value to be found in your view? >> good morning. we like overseas markets. the u.s. has been the low data safe haven for several years and i think it's become a bit of a crowded trade. i like europe and we think china's recession did end around the fall of last year and that

they are in a rebound. may be a poor quality rebound but it is a rebound and that should create some tail winds for the economy globally. in europe we have signs that the european stock market is in an early cycle mode where the economy may be terrible but it's at least stabilizing, and monetary policy is similar, and has the potential to be so. valuations are attractive and the technicals were extremely oversold. as oversold as they were in the u.s. in the spring of 2009. we like the overseas markets here. >> it's funny. is it fair to say that even though you like the overseas markets that the things that we do in this country matter as to whether -- as to how well we do in the overseas markets? >> oh, completely, yes. >> so our fiscal cliff -- our negotiations here for a grand bargain are important for whether you make a lot of money investing overseas? >> right. and a very simple way to look at

it is emerging markets, europe or efa are all high beta versions of the global equities market and the u.s. has been the low beta version. so if you think risk assets are going to rally, and you want to be in a higher state of groups or regions, then you go overseas. and usually, when the fed does qe, and spirits return the dollar goes down. and that also creates a currency translation effect in terms of being overseas if your own currency is the dollar. >> what are some of the emerging markets that you are the most bullish on looking forward in the next year? >> well, yeah, i mean over the next year that's a long time, and you know, these days but for the next couple of quarters we do think china, which, of course, has been a very weak market for the last year or two. has some opportunities, we like other countries in the southeast asian area. we like latin america, as well. you know, we like japan, it's obviously -- but we like japan if we can hedge out the currency

exposure. so there's definitely some areas out in the far east and south america that we like here. and you know, e.m. still continues to get a lot of flows in, but since i would say november of 2010 it's been an underperformer and now it's starting to come back up. >> and during, i guess, i'm looking at some of your comments, there were some people that thought just the discretionary, the cuts in the deal if we had gone over the sequester that that would have solved some issues. but your point is with david. we need -- that's just discretionary. we need to do our entitlements. that's what we need to do. that's front and center for everything. >> yeah, so we recently won over the first cliff. now we have three more cliffs coming in the next couple of months. the market ended up really not going down very much with the first cliff. we had not an 11th hour deal but a 13th hour deal and i think investors will learn from that and say, you know, we're not going to sell here because they're going to presume that

the debt ceiling will be raised and there will be some deal, the spending cuts will come out in the out years, i think that's kind of the way washington works. and if the fiscal drag isn't too bad, and can be offset by other areas of strength in the u.s. economy like housing, for instance, and tailwinds coming out of china the economy can still do okay. obviously without entitlement reform you've got nothing. and it's a shame that we never got that grand bargain, because that could have gotten corporations to invest more. you know, we talk to ceos all the time, and it's clear that corporate america went over the cliff in the third quarter and they basically stopped spending. and they're waiting for some sort of clarity to unleash their spending power again. for now they're just using it to buy back equities, to buy back shares and issue dividends. >> there's absolutely no question that we need to have more certainties so that people will invest more. hopefully we can get a grand bargain this year. i would respectfully suggest we don't want to use the word entitlements.

because they're not entitlements. they are grounded in law but the supreme court has made it very clear that congress, with its will, and the president signing, can change those in any way, in any form, and we need to really recognize that reality. we've got to focus on social insurance reform, health care cost, and comprehensive tax reform. hopefully we'll do that this year. >> all right we appreciate it. thanks for your time this morning. we appreciate it. >> still to come this morning we have more from our guest host david walker. plus what wall street is saying about boeing this morning, after it was announced that the faa would hold a special review of the company's prized dreamliner. and then we climb aboard the earnings stagecoach. banking giant wells fargo will report earnings. we'll have the numbers and the instant reaction all coming your way. up next on "squawk box," don't start your day without knowing the names that will make you money.

joe has your list of stocks to watch right after the break. at 1:45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card

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♪ >> that's all john mixing it the right time. >> let's take a look at some stocks to watch this morning.

best buy announcing these same store numbers, the holiday that we saw down 1.4%, which was actually not as bad as the estimate. street estimate was down 2.5%. and so the stock is actually indicated a little higher. yum brands, the target was cut at bernstein. the firm sees communication missteps as the most important reason for china's investigation into yum's supply chain. however it feels the quality control process change will be relatively minor after it's all said and done. dr. pepper snapple downgraded to performer perform from outperform. this is comments from bernstein, as well. research in motion, downgraded to underperform from market perform at bmo capital. not expecting the new blackberry 10 to stem market share losses at bmo capital. with further pressure, from other products at the low end of the android, as those wrap up,

that's going to hurt rim, as well. ford added to the conviction buy list at gold man sachs. general mills downgraded from sell to a buy and smucker downgraded from neutral to buy at goldman. >> we're going to have more on wells fargo's earnings plus we're going to have some information on the boeing dreamliner. all when we return. this is america.

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earnings alert. wells fargo reporting. we will dig through the quarterly numbers with an analyst. >> problems piling up for the boeing greenliner. cracks in a cockpit window. oil and fuel leaks. and an engine fire, marking a tough week for the new aircraft. >> are you telling us absolutely everything? >> not exactly. we're also out of coffee. >> phil lebeau and an airline analyst will join us at the top of the hour. >> and the s&p closing at a five-year high but can the optimism survive next week's earnings reports? the third hour of "squawk box" starts right now. >> welcome back to "squawk box" here on cnbc, first in business worldwide.

i'm joe kernen along with becky quick and andrew ross sorkin. our guest host this morning, david walker. founder and ceo of the comeback america initiative, and a former u.s. comptroller general. more from him in a minute. first becky is -- has got the definitive word -- >> no, i don't. they're not out yet. go, go, go. >> on wells fargo -- >> we're waiting for wells forgo. >> looks like i got them here, 91 cents a share. that's two cents ahead of expectations. revenue up 7% to 21.9 billion, which is above expectations of 21.288. you see -- did you click on it here or -- >> no, i've got it here. >> you can do it on that blue thing there. you click on the blue and then wfc, it will come up. so i mean there's a lot of whenever you get one of these major money center banks there's

a lot of different metrics that you can look at like you got common equity ratio of 10.12%. let's see, it's actually trading now up about 1.4% after these results. of net income being a couple pennies above. also on, as i said, on 21.9 billion in revenue which is also higher. >> comments out from the chairman and ceo john stump where he's calling this just an outstanding year for wells fargo. he said this time last year i said we would benefit from the many opportunities we saw for 2012 and we did just that. made strategic acquisitions and achieved improvements. take a look here. they also talk about how they returned more capital to the shareholders through the common stock dividends and repurchases. >> net charge off $2 billion. 2.08. provision for credit loss, 1.838. they said total loans were 7.9 -- story, 799 billion dollars. and that is up 29.9 billion from

the fourth quarter of two thought eleven. so almost 30 billion in increased loans. >> they do talk about just the overall economic environment. they say there were a lot of challenges that the industry faced during the last year, including continued low interest rates and elevated unemployment. though, they're not necessarily saying great things about what they see in the economy or at least what they had seen over the last year. only comes in one take at a time. >> where, let me see? >> keep going. >> mine does. >> mine over here. >> i got to go pop out into the next thing during the next thing. >> no. wells forgo at this point 34.99 bid. so no longer actually trading higher on this. i don't know what the metric that came out, but two cents ahead on better than expected write now. >> all right. >> okay. >> talk to an analyst. >> we're going to talk to an analyst and get him on the phone. let's get a quick check on the markets. the dow falling -- would open

about 12 points lower. nasdaq off by two points. s&p 500 virtually unchanged. overseas in asia, as we do a quick fly around you can see we do have a little bit of bad news. shanghai composite off close to 2% on the day. hang seng down 0.39% and nikkei was up close to about a point and a half, and in europe, if we fly there, can you see the ftse up marginally. cac and dax down. >> all right. a tough week for boeing will be capped by more scrutiny. the faa is set to announce a special review of the dreamliner laters this morning. phil lebeau joins us from washington. megan sent me some stuff, too, phil about i think 40%, was it 40% went to al nippon. >> so far. >> of the actual deliveries. and another japanese airline got quite a few of them as well. that's why a lot of the news that we have seen has come out of where the planes have already been delivered and that is the japanese area.

>> most of them have gone to al nippon and jal, japanese airlines. united flies it, there are some other in europe. we're starting to see it around the world. here's what's happening in terms of the review that's going to be announced this morning by the federal aviation administration. this is a safety review of the 787 dreamliner and the focus is on the electronics of the plane, specifically the lithium ion batteries. remember, this plane uses a lot more electricity on board generated by those types of batteries, that's revolutionary. we haven't seen that in airplanes in the past. that's going to be the focus of this review that's done by the faa with the assistance and in conjunction with boeing. the manufacturing process also under review. here's the important point, guys. the planes will stay in service. this is not an air worthiness directive where the faa is saying, we're concerned about these planes. should them down and ground them. that is not what the faa is saying today. if you take a look at shares of boeing, there were two more incidents reported overnight in japan. one with a cracked windshield on one of the dream liners and

another one had a fuel leak. you know, these issues will continue to pop up from time to time. but megan reader our producer got this quote we are confident in the safety of the dreamliner and currently have no plan to conduct any actions to our remaining 787s. that says it all. you have all of the planes being flown right now, the airlines that are flying these planes, generally speaking the airlines say this plane is delivering, and doing what it's supposed to do. and that's why you have airlines coming out and saying we still believe in the dream liner. so again, the press conference is at 9:30 this morning. ray conner who is the new head of boeing commercial airplanes will be at that press conference. we're hoping to talk with him at that point and we'll also be talking with ray lahood, obviously the secretary of transportation. so it's a busy day for boeing and for the faa here in washington. >> all right, phil. thank you. >> and the question now is how will the negative news impact boeing shares? joining us now on set is

barclays analyst carter cooper. what's your take? is this -- we saw sort of fall tuesday, wednesday were not great days. it has come back a bit. >> obviously this has to be put into context, right? so you know, the 787 has had significantly fewer in flight diversions, significantly fewer in flight shutdowns than we saw in the 777 in the mid 90s. i think you got to note reviews are common for the faa and boeing. we had a quality review in 1998, a special technical audit in 1999-2000. a review in 2010, 2011 so you don't want to make the case that this is some sort of special review. i think we got to put this all into context and say, okay, look, the faa works with boeing on a daily basis to make sure the planes are safe. safety is the number one issue. this isn't like the s.e.c. working with, you know, companies and auditing financial statements. this is the partnership between the two, i think the joint press conference that you'll see at 9:30 with the department of transportation, transportation secretary, you're going to see

the faa administrator and the ceo of boeing commercial airplanes tells you this is a joint mission between all the interested parties. >> how about the a380. how has that plane fared, and how are sales going for the 787 versus the a380 today? >> the 787 at the time was the best-selling airplane in the history of civil aviation. so we delivered 50 of those airplanes to customers, there's still another 750 on order. these planes can't get into hands of customers fast enough is what most industry observers will tell you and what a lot of customers will tell you. the a380 is only a competitor in that it's the only other brand-new airplane out there. it had its series of teething problems, as well. >> when that plane first came out were there a lot of problems? >> i'd sigh probably the most serious one they had an uncontained engine failure in flight on a qantas airplane which is a very serious, you know, sort of thing. so that's something we dealt with two years ago. a year ago they identified fatigue in the wings.

the wing cracking issue. >> i remember that one. >> these are things that emerge. they're engineering challenges. but these aircraft are built with multiple levels of redundancy, you know, these are engineering challenges that you will face. but, safety is absolutely the number brian orty. >> do you have any questions about lithium ion batteries and the model? that's the -- beyond the carbon composite, that's the big difference in this plane versus just about every other plane out there. >> exactly. you get 2% or 3% fuel savings by going all electric. removing pneumatic and hydraulic systems. that's obviously something the boeing company has been going for. yes, is there an issue with the fire at logan and trying to figure out what we're going to say about lite yum ion batteries for safety? sure. but connected to the series of incidents that we had before this i think is pure speculation. those events are not connected. they've been tracking different root causes. so the sort of overarching theme that this is all interconnected and there's a problem with the electrical system is merely speculation and might be blown out of proportion.

>> right. but the media, to blow things out of proportion, and to get all hysterical on the one hand it's like, god -- but isn't it good that we do this so at least things are safer and safer and stuff because we're going to jump on every little thing that happens, right? i mean, you got to just expect it. the nature of the game, right? >> i think that's fire. but i made the point on this network a couple of days ago, which is there's 50 airplanes in service. they're probably flying two flights a day. so that's 100 total flights a day. if the plane's got a 98% dispatch to liability, which means two planes aren't going to go within 15 minutes of time. the 737, there's 5,000 of those. they're flying four flights a day. that means 40 of those aren't going to go every day. >> you're not seeing a report. >> i don't see an article on the 737 that doesn't make it. >> carter thank you for providing that context. >> wells fargo reported this a

few minutes ago. let's break down the numbers. joining us on the "squawk" news line, scott the stock was up, then it was down, now it's down again. i saw tat there was a nickel gain it looked like from some, i don't know, something that was different, but also a nine-cent loss that wouldn't have been there. what's your clean number? is it 91 or is it 95 cents or does it matter? >> yeah, morning, guys. as you noted, joe, a lot of moving parts. i'm picking out four or five. the settlement from earlier this week. contributions, charitable trust and income tax benefits. looks like 92 cents when you back those things out. there are a couple of things that say we haven't had a chance to get to you yet. there are things like mortgage servicing right gains that they the investment community tends to back out a little but keep in context this group's already had a very, very strong run including in the year to date the short trading time we've had.

any giveback not necessarily unexpected. >> and not related to what the company said. although we're not in a position necessarily to judge credit losses and additions to the, you know, to that portfolio nonperforming. you're in a position to know what was expected with all those other metrics. is thereish did-how would you characterize the credit quality metric that the company reported? >> from what i see so far, credit seems fine. it looks like they had about 105 days of points of losses we were looking for 100 basis points. as far as i'm concerned that's kind of a rounding error. i don't see anything too meaningful there. on the provision it looks like the 1.8 billion that they provided for credit loss is pretty much right on top of the 1.835 that we were estimating. so i don't see much of anything there. i think what the market's probably going to focus most intently on this morning is the margin and net interest income, which, for a company like wells is a little over half of the revenue stream for the group at

large. you know, anywhere from two-thirds to their quarters of revenue. what you saw here at wells fargo is about ten basis points of margins ee sequentially down to 356 we had hoped it would come in at 360 a little worse than we had thought. and it looks like nii net interest income is down just a bit essentially where they had been hoping it would grow a bit. >> i had a piece of property, a lot that i bought that they were charging me 8.78 on and i asked them, is that normal, 8.78. is that what lot loans get? i paid it off. so they're not getting that from me anymore. and i think that hit their net interest income a little bit. >> it may have. i don't know what your credit score is. >> that wasn't it. 8.78. let me just say that again, 8.78. >> they said it was because there was no building on the property. >> thank you wells fargo, may i have another? thank you -- no, anyway. i'm glad to be out.

how about the loan addition. you want loans to go up. that's what bank does, right? they had 30 billion in loans. was that -- >> yeah, it looks like that's a little better than we had been anticipating. we were looking for only about 4% sequential loan growth it looks like the number is coming in a little better than we had happened. i made those comments that were kind of negative on the way that rate environment was panning out for the group. consequently the volume side or loan growth that's the big driver. to the extent they're coming in a little better than anticipated i view that as a positive. it looks like their portfolio to mortgage loans, banks typically orange that and sell their mortgage loans in this kind of a rate environment looks like they're saying, hey, we're going to put them on our balance sheet, as well. so that's probably a driver. >> originations went down, didn't they? >> mortgage originations yeah that's a little bit less meaningful. because for the most part they're still going to be

selling what they produced. just some portion of their portfolio now -- i think the fact that total originations went down that's not unexpected at all given that this refi boom that's been just historic is probably probably cresting or starting to peter out so you know i'm not that concerned at total originations going down. it's going to be a problem. but it's not an unexpected one. >> -- within the last week some very large fines especially on bank of america for past mortgage loan practices. what is the market is the market assuming that the federal government's basically done what it's going to do there and that's pooind behind us? or what are your thoughts there? >> you know i think the market's hoping that we're at least in the later innings. you saw wells fargo just post about a $650 million charge related to that specific settlement but you know we're really now in about year two or three of these mumty billion dollar penalties for the

industry. last year we had the attorneys general settlement this year to date we've had the $10 billion or nearly $10 billion occ settlement. there are still issues with things like private label security. so it's just this constant headache unfortunately for the industry. you know it's tough to really make a lot of loans when you don't know if a decade from now somebody is going to be able to sue you for making those loans. so as i say i hope we're in the latter innings but given how many prices we've had in the last few years there's no way to tell definitively. >> all right, scott. appreciate it. thanks for your time. i was able to refinance. hackensack thrift and consignment shop out there. i know the proprietor tony soprano. i got a much better -- much better, way down from 8.78. wells fargo. yeah, down in the 13 -- he said 13% per quarter. is that okay? is that not good? >> better than per week. >> you know about the collections agency, right? >> and your legs.

>> yeah, exactly. >> when we come back we are going to continue to watch shares of wells fargo as we approach the opening bell. stock's been down about a little less than 1% this morning. down by about three quarters of a percent. also make sure to watch "squawk" next week. most of the other major financials are set to report on wednesday and thursday. ♪ [ male announcer ] this is karen and jeremiah. they don't know it yet, but they're gonna fall in love, get married, have a couple of kids,

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welcome back to "squawk box." among the other stories that we're following this morning, best buy says u.s. holiday comp sales were flat. internationally comps fell 6.4%. total revenue slipped 0.4% during the critical time before the world's largest electronics chain best buy is now cutting

expectations for 2013 free cash flow after it had to pay for inventory earlier than expected during the holiday season. as becky add explained before we went to break on best buy this is going to have some implications as to whether they are a buyout target still from their former ceo, and we will see where all this goes. but they were waiting on those numbers. >> let's get some more from our guest host right now. david walker is the founder, president and ceo of the comeback america initiative. and david, we talked a little bit at the top of the last hour about what's really going on when it comes to the debt ceiling and the best deals that we can hope for at this point. you say, that the debt ceiling itself shouldn't be something that we are negotiating over right now but right now there are some very real things that they can hold out to try to get the proposals, the republicans can. >> absolutely. let's talk about what the debt ceiling is. the debt ceiling, we're the only country on ert with a debt ceiling. there are other countries that have controls, including debt-to-gdp. debt as a percentage of the

economy requirement but we're the only one that has a debt ceiling. the debt ceiling is really dealing with, you know, hows that have already been passed, apropose riegss that have already been made, ultimately what we need to do is achieve a grand bargain where we get rid of the debt ceiling. we substitute statutory budget controls and i would argue a constitutional debt as a percentage of the economy limit. >> saying you could never go beyond -- >> that's right. >> what percent would that be? >> 120% of gdp, 100%. public debt we're about 75. total debt we're over 100 already. so depends on how you want to count it. let's recognize what it is. on the other hand, spending is a huge problem. we're going to have to reform social insurance programs. we're going to have to do a better job of controlling health care costs. we're going to have to engage in comprehensive tax reform. yes, we're going to need to reduce defense and other spending. some of these things we're going to have to phase in over time so we don't undercut economic growth. so we don't exacerbate our

unemployment, underemployment problem. but we need to pass the laws this year to get it done, and then phase it in. >> what's more important, cutting just in terms of the programs that exist right now or looking at entitlements and trying to make sure you change those down the road? >> well, social insurance programs. i don't use the word entitlements. i think that's part of the problem. >> people feel entitled. >> they're not entitled. >> people will say, yes, i've been paying into this for decades why am i not entitled to it? >> here's the key. let's take medicare for example, 95% of people who voluntarily sign up for medicare get a 75% taxpayer subsidy for their premium. they're not paying. >> they pay in $100,000 over time they get more than $330,000 back. >> the bottom line is they're not paying for it. and, even on social security, people get more money back who retire today on average than they paid in in payroll taxes, if you will. but the answer to your question is the problem is mandatory spending.

it's social insurance problems, health care costs. there's no question. you can't solve this problem just by reducing defense and other discretionary spending. in fact our social safety net quite frankly is in other discretionary spending. so we're going to have to have about two to three parts spending reduction prospectively for every part of additional revenue. and that additional revenue -- and it's going to have to be accomplished through comprehensive tax reform, and we're going to have to phase in social insurance reforms, as well as some of the tax reforms so that we don't have an adverse impact in the short-term but we achieve real deficit and and debt reduction over time >> david's going to continue with us for the rest of the program and we will dig a little deeper into this as well. when we come back we'll have more from david. then what's next for tim geithner? a return to the private sector? or maybe another high profile public job at the fed. steve liesman will just a few minutes stamps.com is the best.

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welcome back, everybody. in our headlines this morning, some vodafone customers are not receiving e-mails on their blackberry phones. today vodafone says it is working with research in motion to try to fix the problem. blackberry says that it is looking for the issue as well but a spokesperson did not have an answer. coming up, breaking economic data, international trade numbers and import/export prices.

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welcome back to "squawk box." we're just seconds away from the international trade numbers. uh-oh. glad this is cable. also import/export prices.

rick santelli standing by at the cme in chicago. steve liesman in the studio. rick the numbers, please. >> all right. for the trade balance, november, is 48.7 billion. of course that's a deficit on the balance. and that's a lot of deterioration from a slightly revised 24.1 billion deficit last month. in terms of import prices, up one tenth of one% month over month. if you're looking at year over year -- i'm sorry, that's down one tenth. down 1.5 year over year. we're down 1% on export prices which is also fairly interesting. so, you know, as we look at things like energy prices move yesterday towards higher levels, we see what's going on with the interpretation with the new leadership, and almost instantaneous turn in all their data that, you know, the soft landing is alive and well.

maybe even gets more regressive, is definitely doing something that normally is accomplished by a weaker dollar. which really hasn't been the case, even though yesterday was weaker. so we'll continue to monitor how these numbers figure in. really hasn't been a large move in the market. if you want to look at something simple, keep in mind that 1.91, 191 is the highest yield close for this move in tens, even though we came closer to 2%. so i would kind of view that level on a weekly closing basis, which is a more powerful technical indicator than obviously the dailies. you want to use that as your pivot. back to you guys. >> okay. appreciate that, rick. stalling a capitol hill bit i don't think you're going to get it. steve liesman? with us now. >> you have another segment on? >> i thought maybe when you started talking we could have a little bit of that lullaby? >> is this now going to be -- i thought it was going to be

episodic. not everybody tuned in yesterday. you want to fill them in -- >> we have alarm clocks where you can get an application where -- >> i saw your ad. >> steve did not do one but they asked him to do one for night time when you're in -- >> when you can't sleep. >> you have insomnia. >> he's making that up. >> and we just put his normal reports to this type of music. >> i would sit here and say look at the seasonal adjustments to jobless claims in january. >> play this music and then you would -- >> you've seen these side effects for ambien? >> 12 hours longer than -- >> the side effects for liesman are only the nightmares you have before you go to bed. >> but they did get it going. >> they did. i wanted to talk about something, a couple, walker about the trillion dollar coin. in which he gave me a trillion dollar piece of paper. i think that's illegal, right? they can't print paper trillion

dollars but they can print a coin. >> you gave this to me. >> the largest bill in circulation is $100. so if you have anything more than $100, it's fake. it's not illegal to give it to you. it's illegal for you to try to use it buy something. >> is it illegal for the treasury to print it? >> no, it's not illegal for the treasury to print it. let's have some substance. to me this trillion dollar coin is one of the dumbest economic and financial ideas in the history of mankind. >> paul krugman came out in favorite of it. >> it's one of the dumbest economic -- >> history of man kind. >> what did you say? >> i said of course that gentleman, that you mentioned would be in favor of a trillion dollar coin. >> the one who came out -- >> you're saying that he is like voldemort? >> no, he's actually very smart. he's really smart. he's anticipating the cost of a can of coke in about eight years after the fed exit so he wants

to get those coins ready. >> oh, so you're saying it will be inflationary in eight years if they print the trillion dollar coin? >> listen, this really shows that some of these prizes we give to, you know, noted scientists and economists, we really need to start being careful. i'll tell you what, so many people serious about that coin, i think it's absolutely -- >> the white house has not -- the white house has not embraced it, nor have they embraced the idea -- >> could this point that the debt ceiling debate is a silly accounting discussion? so why shouldn't we use a silly accounting gimmick to solve it? which is that you already have appropriated this money and the idea that you have to then go back and give treasury the authority to print money to borrow for it is artificial. it's just a game. and so why wouldn't you then use another game to counter? which that -- >> of course a dumb idea and a dumber idea don't make a good idea. >> that's true.

>> they do to come. >> no, i understand. >> some people really are buying into it. i can't believe the number of e-mails i'm getting from people trying to kick the tires on that nonsense. that financial high poth carry measure. >> the one that you have is fake. this is real. this is a $100 trillion zimbabwe bill. look, we got to get real. we've got real fiscal problems, tax and spending, we've got real monetary problems -- my view is -- >> -- may view is we ought to eliminate the debt ceiling. we ought to substitute statutory budget controls and a debt-to-gdp -- >> david, it gives the minority a chance to come back and get their way in a way that they couldn't get in the normal political process. >> it is more of a political issue. we should -- but they should use, in my view, they should use the sequester and the cr as leverage, because spending is the primary problem, and this

last bill was an "f" on smending reductions. >> okay. >> i just want to go on to the next thing, which is information i have is that he will be at treasury through january 25th, and then -- >> why do you say whither geithner? >> is that not whither? >> i thought like withered on the vine. >> no. >> it has an "h" in it. >> the way you said it. >> whither. >> so he stays at treasury. then he's going to take like six months off and maybe go to a think tank and that kind of thing and maybe give some speeches. so the question is whether -- >> cnbc contributor. >> a couple interviews at cnbc. tim come on and join us any time. so the issue is would he come back in to government? bernanke's term -- >> a year from now? >> that's what he's going to do. >> that's my guest. >> i am told he doesn't want to do it.

but i'm also told that president obama as we know has been very persuasive, very effective at convincing geithner to do things he doesn't want to do. and, so, the question becomes what -- where could he go now? >> i think he's -- >> and still be eligible to come back -- that's the bigger discussion, which is in government, when it comes to -- then you go to wall street -- >> no, no, no. >> and come back -- >> he's going to come back and be a quarterback and get all the beautiful girls, i think. >> at alabama. >> at alabama. that is what i think -- >> roll tide. >> do you know how trouble musburger got in? >> shouldn't have gotten in any. that was ridiculous. >> can we roll tape on that? because we're showing geithner now. >> -- aging geithner. >> andrew you have it figured out. >> he's going to spend a year giving speeches. probably between $75,000 and $125,000 a pop. pop off about two of those a week for about 48 weeks for the year. so he's going to make some money

doing that. he's going to pay -- he will pay his taxes. rob rubin will give him a slot at cfr, central foreign relations. that gives him a title. >> by the way he's making $199,000. and i think paying for his own commuting back and forth to new york. >> he's a billionaire. like obama. >> write a book for -- >> -- future self-. >> and that will take him a year and a half. >> no it's too late. >> remember and then he could take bernanke's -- >> remember bernanke is up a year from now. >> and so january 14th. >> no because the nomination comes in the fall. >> so you don't think he gets his old job back at goldman sachs? >> the one he never had? the one he never had. isn't that -- i mean -- >> rick, i'm afraid to even ask you because i know what you think. but, if you could, what do you think the market would think about a geithner chairmanship at

the fed? >> you know, i'm not -- >> you know, it's the weekend. we're over 50 degrees in chicago. >> we're just going to call it a day. >> it probably wouldn't make the exit any worse than it's going to be. and take that at face value. >> all right. well we're going to come back at 10:00. when we talk about what's become the geithner model. maybe rick will join me. >> for treasury secretary? >> no, for solving financial crises. and we now, is there this idea of enshrining too big to fail or enshrining a government response to a financial crisis? what woo very learned from four years of tim geithner? coming up. >> coming up investing abroad. we're going to take a look at stocks and sector plays that will make you some money on a global scale. international fund manager george evans is going to join us on how he's investing and talk to us about how he's investing

in the new year amid all this global uncertainty.

welcome back to "squawk box" on this friday morning. things have turned around. futures are now slightly up. we did have red arrows earlier in the morning and now things have turned remotely positive. making headlines, jpmorgan facing a u.s. order to improve compliance. reuters is now reporting that a government probe is expected to result in an order that the bank correct lapses in how it polices suspect money flows. an announcement could come as soon as today the report said. jpmorgan is not expected to pay a monetary penalty because regulators have been taking steps to force banks to tighten their anti-money laundering systems. this is just one more to add to the list. >> let's take some time right now to take a step back from the united states. take a look at some global growth plays that could make you money in this new year.

joining us is oppenheimer international's fund manager george evans. his fund was up over 20% over the last year and was given a five star rating by morning star. so, george, thank you for joining us. obviously you had a very good year last year. when we before been talking to people this morning and over the last couple of weeks several of them have told us that they think this time around things are really kind of shifting away from the united states looking to some of the overseas markets that you might see some more growth out of those markets this year. you agree with that? >> i think it's a great stock opportunities internationally. we don't tend to look at big macro-oriented plays, you know, in terms of a play on a revival of german growth or europe's going to fix itself. there are some fantastic industries out there, which in spite of the slow growth factor are growing extremely fast at a sustainable rate. >> such as? >> well, we've got a lot of investments that are related to the relentless increase in the amount of data that we generate.

whether it's people that transmit it, store it, manage it. we have a lot of very, very good investments that will benefit from the, you know, the very, very long-term and huge increase in spending power in the emerging market. >> george, can you look down? do you see a mic on your tie or on your jacket? >> i do. >> you do? >> hold on. i do not. >> yeah. >> sorry. there it is. >> george, thank you. >> thank you. >> because we want to hear -- you've got important stuff to tell us. >> that's all right. this happens all the time. this is live television one of the risks. thank you for playing ball. >> in -- in my technologically. >> thank you for playing ball with us. >> okay, there we go. >> that's better. shut up, joe. all right, george, let's talk a little bit more about some of these areas. you just talked about relating to the data that's out there, storing it, managing it, are you talking about things like cloud management or are you talking about something else? >> well, there's some cloud plays.

there's data warehouses. there's, you know, the need for investment in cellular infrastructure. there's just the sort of the fact that there's this copious amount of data, and we're going to get a lot of choke points. choke points lead to people being able to charge tolls, tolls equal profits. >> you know, i would -- i would agree with you 100% based on everything i've seen over the last year or two until the last few weeks when we've seen some concerns about what's happening in the cloud and if that's a place where you can really hack in. whether there are concerns about that. is that anything you worry about that that could slow things down with some of these proposals? >> obviously security of the cloud is a big area, too. so those, you know, the people that are going to benefit have got to provide a secure service. but the fact is over the long-term, the amount of data that we're generating is doubling every year. it's tripling every year and that is going to go on for many, many years. this is not a few months and then it's going to peak out. it's going to go on for a long time.

>> is that why you like s.a.p.? >> i like s.a.p. a lot. i like a lot of the software, certain hardware, uninterrupted power, satellite companies. i think it's going to be a chance for a revival of the -- of the fixed-line telephones in europe. better regulatory environment there. and just a lot of data they've can charge for. >> what do you like heineken? >> well, first of all it's one of the few global beer brands. secondly, it's acquisition of apb quite recently it's now 60% emerging markets. i think that there are a lot of very good brewers in the world. heineken has been somewhat ignored i think for much of the last five years. had a good year last year but we think it's still got plenty of upside. >> george, we want to thank you for your time today. and some good picks.

we'll have you back to talk more about other stocks that you see out there. >> thanks a lot. >> coming up, stocks on the move ahead of the opening bell. wells fargo, best buy and others with jim cramer right after the break. [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information... ♪ into a fifth anniversary of remission? ♪ whatever your business challenge, dell has the technology and services to help you solve it.

welcome back to "squawk box" this morning. look at futures real quickly. now we're back in the red on the dow. the dow looks like it would open about five points off. the s&p 500 almost slightly up. nasdaq has just been going back and forth. but here we are down a few points. jim cramer joins us now. mr. cramer, good to see you. >> >> good to see you. >> i hope you don't get the flu. we've had the flu going around this table here. >> david's got a cold, and i'm sitting next to him, so i guess i'll have monday off. >> maybe i just have a cold. i hope it's just a cold. let's talk wells fargo, guys. what's your sense on the portends for the market today? >> wells fargo, you've got to own this. you've got to own the bad. the numbers have to come down. i was hoping for a lift in that interest margin, and what they make. discard it from the journal today. there's literally too much money

here. they have too many deposits. they cannot make enough money on the money so therefore, the people sell the stock. maybe they can make up enough later in the year to make loans. >> we're going to be seeing earnings from the other banks starting next week. is there anything from this report that we can tease out, that's going to have implications for the rest of them? >> smaller regional banks will do better. they are the ones that somehow, they've been able to make internet margins. but the larger banks, look, wells is the best there is. there's no doubt in anything that i saw that wasn't great. it's just that you need to get the stock to go higher, after 32 to 35. they delivered 3.55 interest margin. i know they sound little. but joe said there are many moving parts. the moving part is the interest margin. that did not move correctly. >> 8 7/8.

>> if they do big construction loans, we're going to see a surprise later in the year. you're only going to see the upsides from the regionals. bank of america still so low, maybe that works. but look, it's an encouraging word that wells is a great national bank. people are throwing money at it. >> your views on boeing? >> mcinernie will get this thing to work. i don't think it's as serious as people say. >> we'll see you next on "squawk on the street." david walker has been our guest on the show. we'll give him the last word right after this. monday on "squawk box," an extended interview with the deputy chairman, we'll talk financials, the economy and broader markets. and a first cnbc interview live from the detroit auto show.

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we've been talking a lot about the new treasury secretary. what kind of people, names if you have them, would you like to see if we're going to be trying to get a grand bargain that wind up either in the treasury department, omb, or others to be around in the group on this? >> in my view, omb is more important than ever now. obviously you can see other slots filled potentially at treasury. after lou gets confirmed, and i do expect him to get confirmed, there are capable people who can

work with republicans and democrats. and one of the things that i thing is very important, excellent communication skills to start communicating with the american people about the facts, the truth and tough choices. >> would you like to see him call for more republicans on board? >> i've called for a unity cabin cabinet, and he's taking steps toward this, you need to have more independence. independence are 40% of the elector at. they decide who wins. after the election, they're forgotten about. i believe that independents will be a majority of the american electorate in the next ten years unless we see a break-through. >> are we going to vote for an independent? >> i think it's very possible if we don't heal our democracy, we have a republic today that is not representative of or responsive to the public. and as you know, i'm one of the national co-founders of no labels. we've got a major event in new york. republicans, democrats and independents that value